There has been a lot of talk about inflation recently.
So I wanted to talk about what exactly is inflation, where is inflation right now
and where is it headed and what can we do to have a hedge against inflation?
And if you watched my last video, you will notice I'm wearing my glasses again.
And this video, I did have a consultation appointment to see if I could get LASIK.
And it turns out I qualify for PRK, which is similar to Lasik.
So I'm going to end up getting that surgery soon.
So there will probably be a few more
videos with my glasses on and then afterward, no more glasses.
I thought I better get the surgery done
now, before inflation goes up even further.
And if you haven't been to my channel yet, I am Tiffany Thomas with Wealthy
Tiffany Dotcom and I achieved financial freedom at age thirty eight.
And if you are looking to achieve
financial freedom at a young age as well, then hit that like button and hit
the subscribe button and we're going to dive right in.
What exactly is inflation?
Inflation is the decline of purchasing power of a given currency over time.
Essentially, inflation occurs when prices
rise, decreasing the purchasing power of your dollars.
To give you an example, in 1980,
a movie ticket cost on average $2.89 by 2019,
the average price of a movie ticket had risen to $9.16.
If you saved a ten dollar bill
from 1980, it would buy two fewer movie tickets in 2019
than it would have nearly four decades earlier. It might be frustrating for us
to think about our dollars losing value over time.
But it is considered to be OK to have
a small amount of inflation because it does encourage us to spend or invest our
money right now rather than just keep it under our mattress and not have it earn
anything for us and completely watch its value diminish.
Too much inflation can be destructive for an economy because prices will become
so high that people will not even want to live there anymore.
So we definitely don't want that to happen.
And where is inflation at right now?
The annual inflation rate in the United States soared to four point
two percent in April of twenty twenty one from two point six percent in March,
and it was well above the forecasts of three point six percent.
It's the highest inflation rate since September of 2008.
As the economy reopens, commodity prices are going up.
There are supply constraints.
The biggest increases were recorded for gasoline.
It was up forty nine point six percent
versus twenty two point five percent just in March.
Also, housing was up to two point one
percent versus one point seven percent back in March.
Where is inflation headed in the future?
From everything that I have read
and studied, honestly, no one has a clear answer on where
inflation is really headed because we've never seen this type of situation before.
Just to give you some examples, we've never seen the Fed push this much
money into the economy before, and we've never seen such high job losses before.
So everything is just very uncertain right now.
And you probably have noticed this.
There is a lot of demand in some sectors,
but not enough supply or not enough demand and too much supply.
For example, the cost of women's dresses decreased by more than 11 percent because
women were opting for casual attire because they were working from home.
The structure of our entire economy has changed quite a bit and we are trying
to figure out the best way to handle those changes.
There were a lot of miscalculations.
For example, when the pandemic began, many sawmills shut down,
anticipating a housing slump that actually never happened.
Instead, more people were working from home and they wanted nicer homes.
As a result of that,
there was plenty of lumber, plenty of raw material to build houses.
But the constraint was actually
on the sawmills, just another reason that home prices are rising.
But this example of lumber can show
that inflation may be temporary because once more sawmills return to their normal
levels of activity, then lumber prices should drop.
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While rising prices will most likely be
felt pretty hard by those that are low income households,
a moderate inflation may not be such a bad thing for a lot of people and businesses.
For homeowners with fixed loans on their mortgages, higher inflation actually
lowers their real cost of paying interest charges on their debt because they already
purchased that house at a certain price and.
Now that home prices are a lot higher,
it doesn't mean they're going to pay more for their mortgage, they will actually end
up paying less in a sense because of higher inflation rates.
And inflation could actually help workers, those that have a nine to five job,
because companies will be able to increase wages more easily.
And there are even some signs that employers are boosting wages right
now to meet that rising demand because of the lack of available workers right now.
And going back to that again, higher inflation will lower the real cost
of paying the national debt, although the downside of that is
that the government will most likely have to raise interest rates since we are
in unprecedented times right now because of the aftermath of what happened last
year, pretty much all of the forecasts are clouded by uncertainty.
So we aren't really sure where inflation is headed.
What exactly can we do to hedge against inflation?
Honestly, the best way to get ahead of inflation is to continue to invest your
money in things that are going to continue to grow over time.
That's why I like continuing to invest in the stock market and stocks.
And that doesn't mean you have to invest in individual stocks.
You can definitely choose an index fund
that has a whole bunch of stocks inside of it.
And if you're curious to know which index
fund I really like, I did create a video for you.
So I will leave a link above and below
in the description and you can check that out after this video over.
Even though things can get crazy in the stock market in the short term,
as long as we keep that long term mindset, we are going to be just fine because
the stock market continues to rise over the long term.
I also like investing in real estate and we can see over the past a little bit
real estate has gone up quite a bit.
And while I am glad I did invest before then, it doesn't mean that I'm going
to stop investing now, because if we look at the long term instead of the short
term, our investments will continue to rise over the long term.
That includes in the stock market and in real estate as well.
And one way that I know exactly how much
money I have to invest is by keeping track of my money.
And I do this very simply with a free app called Personal Capital. You can link all
of your financial institutions to it, not only your investment accounts,
but your checking or savings or credit cards, everything that you can think of.
And you can see all of your finances in just one place.
So I've been using that for a few years and I really like it.
I will leave a referral link below
in the description and you can get a free 20 dollar gift card to Amazon if you hook
one of your retirement accounts to personal capital.
If we keep our money sitting in a savings account or even under our mattress,
there's no way that money will keep up with inflation rates.
So we are actually losing money by doing that.
So no matter if inflation continues
to rise or if it doesn't, we know that we need to be consistent
with our investing and that way we can not worry about inflation.
So much comment below and tell me what
you're going to do to keep ahead of inflation.
And if you found this video helpful,
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Thanks so much for watching.
I'll see you in the next video.